On the list of things an electronics executive should have to worry about, the price of blue jeans would seem to be safely low on the list. However, when last week's news broke of violence in Zengcheng, China, sparked by the arrest of an illegal denim hawker, the wise money in Asian electronics took notice.
What was notable about the unrest wasn't that it happened, but that it got reported, filmed, distributed, and talked out internationally, in defiance of the Chinese government's usual success burying such news. This is particularly important since Zengcheng, though known as a hub of China's apparel industry, is only an hour or so from Guangzhou, a behemoth manufacturing region, where rather than work in cotton, they more often work in silicon.
Outside China, in neighboring Asian regions and beyond to the larger world, the particulars of the Zengcheng disturbance is what translates. In Europe, or Australia, or even India, I'd wager, few care whether the argument was about blue jeans. What we see from outside, rather, is the latest evidence of growing boldness by Chinese labor and small business to demand concessions of employers and governments, local and national. Or at the very least, we are seeing more success at making the existence of those demands known around the world.
We have now seen a series of events that we would not have heard about quite so completely even five, six years ago. Beginning with public admission of suicides at Foxconn's factories, then protests about wages, the recent fatal explosion also at Foxconn, and now Zengcheng unrest hitting YouTube, the next question is: What happens, both in terms of supply pressures and public perception, when electronics has its Zengcheng? (See: Apple Has a Foxconn Problem.)
That's not a theoretical question. As we learned from Japan's recent tsunami, investors are extremely nervous about the fragility of Asian supply chains. With good reason. Asia's international chain of fabricators, assemblers, and shippers is unusually complex, and it seems that lately everyone is talking about the once-unthinkable option to reduce exposure to China. First it was rising wages. Then it was labor conditions. And now, with examples of hard-line responses to labor protections, Indonesia, or India — or, for that matter, non-Asian locations closer to consuming markets — will start looking more and more attractive.
The fairly obvious solution to all this is the one that seems least likely to happen. That would be for reasonable requests by Chinese workers to find acceptance as free speech. “I feel the rule of law here doesn't seem to exist, the local officials can do what they want,” a Chinese manufacturing worker told Reuters after the Zengcheng unrest. If that's true, and more and more evidence of pushback starts bubbling into the international media, Wall Street is going to start seeing China as the risky stop in Asia's already-stretched supply system, and will start looking for assurances.
And if they're able, which they certainly appear to be, Chinese labor advocates will use the heightened investor nervousness to increase pressure on manufacturers. And if that happens, it will come down to a struggle between OEMs that need their suppliers humming, and Chinese officials who so far have seemed more wont to tamp down evidence of problems than alleviate them.
Years ago, part of the technology revolution was the replacement of the stuffy east coast business suit with blue jeans, the unofficial uniform of Silicon Valley. Suddenly, that's looking like an apt but less comfortable metaphor.